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Most of us are well on the way with our preparations for FSA regulation in January 2005. Application forms have been completed and Managers have started to plan and implement the changes required to ensure full compliance. But don’t forget, compliance is not just about ensuring your senior management team understand the implications of regulation. What your front line staff do is just as important. After all, underpinning the whole objective of compulsory regulation is consumer protection. So the people we employ to serve our customers must know, understand and apply the FSA rules practically, regarding selling and administration, to their work on a day to day basis.

So far you are aware that your staff will need to be deemed competent to advise before they carry out the complete sales process with customers. A key part of Training and Competence is ensuring staff have sufficient knowledge and experience to provide advice and make recommendations to a customer. They all need to understand what the FSA rules require otherwise how can they be acting compliantly? So, unless you have told them, or unless they have read ICOB (Insurance Conduct of Business) from front to back, they may not be aware of just what the rules require. Yet this is vital in determining whether they are ‘competent to do their job’.

How many of your staff, at this point in time, know how to distinguish between a commercial and retail customer (in FSA terms) and, specifically, how to treat a commercial customer who buys a mixed use policy? If the FSA rules came into effect tomorrow would your staff be able to conduct a compliant sale? That is, know what information they must give to customers, and when to provide it? Do they understand the difference between quoting face to face and over the telephone? Are they aware of the cancellation rights that apply and who is entitled to them? What about the types of customer that can take a complaint to the Financial Ombudsman Service (FOS) and how they advise the customer to do this?

As their manager, you may well be able to answer all of these, but if you’re going to be fully prepared now is the time to start working with your staff. It is important that they feel comfortable and confident with the changes to their working practices. You may have thought about leaving this until nearer the time - after all, why train them now when they don’t need to implement the changes for another few months? There are two issues surrounding this:

Firstly, remember that your staff will need time to prepare for the changes and how much time will depend on the individual, their experience and the length of time they have been performing their role. The latter is an important consideration because it is a natural assumption that those who have been doing the role longer will be quicker to take the changes on board. After all, they have the most experience. However, sometimes changing the way we do things is harder for those who have been doing it one way for a long period of time, and easier for those who are newer to it. So take this into account. Those of us who have been working with our staff in implementing GISC will have a good idea about the learning styles of our staff and so remember what worked, or didn’t, last time.

Secondly, the Distance Marketing Directive (DMD). We are so used to all the focus of the new legislation being geared up for January, but don’t forget the DMD brings in new legislation from 9 October 2004. This means that, when we conduct any distance marketing activity (provide a quote/conduct a sale over the telephone) we have to comply with certain legislation from October. So what does this mean?

The Financial Services and Marketing Act (FSMA), Insurance Mediation Directive (IMD) and the Distance Marketing Directive (DMD) produce legislation that affects our industry. The Financial Services Authority (FSA) is given the power to regulate us in accordance with this legislation. The DMD starts on 9 October 2004and the FSA have been given delegated authority to regulate us on this legislation from that date. By January 2005 the remaining legislation will come into effect and the FSA will then regulate us for it all.

When quoting/selling over the phone, your staff will need to ensure a certain amount of information is disclosed before the contract is concluded, such as;
• the insurer
• the product recommended (which must include a description of the main characteristics)
• the total price to be paid by the customer
• any out-of-court complaints and redress arrangements along with any compensation arrangements
• the fact that a retail customer has the right to withdraw from certain distance contracts (14 days cancellation rights from conclusion of the contract or receipt of the policy document (whichever is the later).

So, if you haven’t started training and preparing your staff, start now.

Think about how you train them. They need to have an understanding of what the FSA is all about. They need to know what the rule book looks and feels like. But is it realistic to ask them to read it from front to back and assume they then know what to do? Probably not, after all, was that a realistic expectation for us when faced with reading CASS, SYSC, PRU, COND and so on?

Communicate what the effect of the rules will be and what they need to do. Granted, it may not be rocket science, but it is still a change. When trying to implement any change, you are asking someone to change their habits and this can take some time and practice.

Try not to stipulate how your staff sell to a customer and what they must say at each stage. Chances are, if they are doing a good job for you, they will have their own style and their own process which works for them. Trying to change their style may do more harm than good, and could well knock confidence (and sales performance!). It may also leave them with a bad taste in their mouth about compliance. So work with them to ensure that what they need to do from 9 October 2004 and from 14 January 2005 fits in to what they do now and their own way of working. Once this is achieved, they can then look forward to getting back to selling …… compliantly of course!

This article was written by Elizabeth Mills, Director, Broker Network
An edited version of this article was published in Insurance Times